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(Kitco News) - Gold futures turned weaker in late dealings Thursday, erasing the gains the market established earlier in the session as bearish traders took advantage of the slightly higher prices to sell.

At 12:15 p.m. EST, April gold futures on the Comex division of the New York Mercantile Exchange were down $5.90 at $1,639.20 an ounce.

The market continues to move in a very choppy pattern, rising to test support and resistance, but not settling on a definitive direction. Kevin Grady, owner of Phoenix Futures, said there wasn’t a particular piece of news that drove prices off their earlier highs. “This market is so very jittery,” he said.

Grady said earlier in the session, prices popped higher when the daily open interest figures rose despite the lower price settlement on Wednesday. Open interest is the number of outstanding positions left at the end of the trading session. Higher open interest on a day when prices settle lower is a sign of sellers establishing new shorts. He said there might have been some short-term trading interest in trying to push the market higher to cause those shorts to cover and extend the gains.

Yet the gold market did not take out Wednesday’s high of $1,655 and instead probed below that day’s low of $1,640.50. April futures dipped as low as $1,636.50 intraday, but have drifted off that level.

Charlie Nedoss, senior market strategist with Kingsview Financial, said short-term attitudes changed in the gold market. “People are lining up to sell rallies. The U.S. dollar is a little stronger. The people who were buying are throwing in the towel. I think that happened last week when we closed under the 200-day (moving average),” he said.

When gold was unable to hold above $1,650, that might have encouraged some bears to establish new short positions, Nedoss said.

Nedoss and Grady pointed out that there is key technical support that lies between $1,627 and $1,625. If gold breaks through that level, several gold market watchers said it could uncover waves of sell stops, or pre-placed sell orders, that might encourage further selling.

“All we’re doing is trading the range,” Grady said.

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